As filed with the Securities and Exchange Commission
on September 3, 1999
Registration No. 333-_______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________________
Pacific Sunwear of California, Inc.
(Exact name of registrant as specified in its charter)
___________________
California 95-3759463
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5200 E. La Palma Avenue, Anaheim, California 92807
(714) 693-8066
(Address and telephone number of principal executive offices)
___________________
Pacific Sunwear of California, Inc. 1999 Stock Award Plan
(Full title of the plan)
___________________
Greg H. Weaver, Chief Executive Officer
Pacific Sunwear of California, Inc.
5200 E. La Palma Avenue
Anaheim, California 92807
(Name and address of agent for service)
___________________
Telephone number, including area code, of agent for
service: (714) 693-8066
___________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> C>
Proposed Proposed
maximum maximum
Title of Amount offering aggregate Amount of
securities to be price offering registration
to be registered per unit price fee
registered
Common Stock, 1,200,000(1) $24.1875(2) $29,025,000 $8,068.95(2)
par value $0.01
per share
___________
(1) This Registration Statement covers, in addition
to the number of shares of Common Stock stated above, options and
other rights to purchase or acquire the shares of Common Stock
covered by the Prospectus and, pursuant to Rule 416(c) under the
Securities Act of 1933, as amended (the "Securities Act"), an
additional indeterminate number of shares, options and rights
which by reason of certain events specified in the Pacific Sunwear
of California, Inc. 1999 Stock Award Plan (the "Plan") may become
subject to the Plan.
(2) Pursuant to Rule 457(h), the maximum offering
price, per share and in the aggregate, and the registration fee
were calculated based upon the average of the high and low prices
of the Common Stock on September 1, 1999, as reported on the
Nasdaq National Market System and published in The Western Edition
of The Wall Street Journal.
The Exhibit Index for this Registration Statement is at page 8.
</TABLE>
<PAGE>
PART I
INFORMATION REQUIRED IN THE
SECTION 10(a) PROSPECTUS
The documents containing the information specified in Part
I of Form S-8 (plan information and registrant information) will
be sent or given to employees as specified by Securities Act
Rule 428(b)(1). Such documents need not be filed with the
Securities and Exchange Commission (the "Commission") either as
part of this Registration Statement or as prospectuses or
prospectus supplements pursuant to Securities Act Rule 424.
These documents, which include the statement of availability
required by Item 2 of Form S-8, and the documents incorporated
by reference in this Registration Statement pursuant to Item 3
of Form S-8 (Part II hereof), taken together, constitute a
prospectus that meets the requirements of Section 10(a) of the
Securities Act.
<PAGE>
PART II
INFORMATION REQUIRED IN THE
REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference
The following documents of Pacific Sunwear of California,
Inc. (the "Company") filed with the Commission are incorporated
herein by reference:
(a) Annual Report on Form 10-K for the Company's fiscal
year ended January 31, 1999;
(b) Quarterly Report on Form 10-Q for the Company's
quarterly period ended May 2, 1999; and
(c) The description of the Company's Common Stock
contained in its Registration Statement on Form 8-A
filed on February 24, 1993, and any amendment or
report filed for the purpose of updating such
description.
All documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), prior to
the filing of a post-effective amendment which indicates that
all securities offered hereby have been sold or which
deregisters all securities then remaining unsold shall be deemed
to be incorporated by reference into this Registration Statement
and to be a part hereof from the date of filing of such
documents. Any statement contained herein or in a document, all
or a portion of which is incorporated or deemed to be
incorporated by reference herein, shall be deemed to be modified
or superseded for purposes of this Registration Statement to the
extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or amended, to constitute a
part of this Registration Statement.
Item 4. Description of Securities
The Company's Common Stock, par value $0.01 per share (the
"Common Stock"), is registered pursuant to Section 12 of the
Exchange Act, and, therefore, the description of securities is
omitted.
Item 5. Interests of Named Experts and Counsel
Not applicable.
Item 6. Indemnification of Directors and Officers
The Company's Articles of Incorporation provide that the
liability of the Company's directors for monetary damages shall
be eliminated to the fullest extent permitted under California
law. The Company's Bylaws include a provision that eliminates,
to the fullest extent permitted by California law, the personal
liability of its directors and officers for monetary damages in
any legal proceeding based on their action or inaction as a
director or officer, subject to certain limitations for actions
initiated by the director or officer, settlements not approved
by the Company, losses covered by the directors' and officers'
liability insurance policy maintained by the Company, and
judgments for an accounting of profits pursuant to Section 16(b)
of the Exchange Act and similar laws.
The General Corporations Law of California (the
"Corporations Law") (1) eliminates the liability of directors
and officers for monetary damages in an action brought by a
shareholder in the right of the Company (referred to herein as a
"derivative action") or by the Company for breach of duty to the
Company and its shareholders and (2) authorizes the Company to
indemnify directors and officers for monetary damages for all
acts or omissions committed by them in their respective
capacities. Both the Corporations Law and the Bylaws of the
Company, however, prohibit indemnification for: (a) acts or
omissions that involve intentional misconduct or knowing and
culpable violation of law; (b) acts or omissions that a director
or officer believes to be contrary to the best interests of the
Company or its shareholders or that involve the absence of good
faith on the part of a director or officer seeking
indemnification; (c) any transaction from which a director or
officer derives an improper personal benefit; (d) acts or
omissions that show a reckless disregard for the directors or
officers duty to the Company or its shareholders in
circumstances in which such person was aware, or should have
been aware, in the ordinary course of performing his or her
other duties, of a risk of serious injury to the Company or its
shareholders; (e) acts or omissions that constitute an unexcused
pattern of inattention that amounts to an abdication of the
directors' or officers' duty to the Company or its shareholders;
and (f) liabilities arising under Section 310 (contracts in
which a director has material financial interest) and 316
(certain unlawful dividends, distributions, loans, and
guarantees) of the Corporations Law. In addition, the Company
may not indemnify directors and officers in circumstances in
which indemnification is expressly prohibited by Section 317 of
the Corporations Law.
The Company has entered into indemnification agreements
with its directors and executive officers that require the
Company to indemnify such directors and officers to the fullest
extent permitted by applicable provisions of the Corporations
Law, provided that any settlement of a third party action
against a director or officer is approved by the Company, and
subject to limitations for actions initiated by the director or
officer, penalties paid by insurance, and violations of Section
16(b) of the Exchange Act and similar laws.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
See the attached Exhibit Index at page 8.
Item 9. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required
by Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any
facts or events arising after the effective date
of the Registration Statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
the Registration Statement; and
(iii) To include any material
information with respect to the plan of
distribution not previously disclosed in the
Registration Statement or any material change to
such information in the Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required to be
included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the Registration
Statement;
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and
the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act,
each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(h) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors,
executive officers and controlling persons of the registrant
pursuant to the provisions described in Item 6 above, or
otherwise, the registrant has been advised that in the opinion
of the Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the
registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-8 and
has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the
City of Anaheim, State of California, on the 18th day of August,
1999.
By: /s/ Greg H. Weaver
Greg H. Weaver, President and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and
appoints Greg H. Weaver and Carl W. Womack, or either of them
individually, his true and lawful attorney-in-fact and agent,
with full powers of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to
this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith,
with the Commission, granting unto said attorneys-in-fact and
agents, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them
individually, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
/s/ Greg H. Weaver Chairman of the Board August 18, 1999
Greg H. Weaver and Chief Executive
Officer (Principal
Executive Officer)
/s/ Carl W. Womack Senior Vice August 18, 1999
Carl W. Womack President, Chief
Financial Officer and
Secretary (Principal
Financial and
Accounting Officer)
/s/ Pearson C. Cummin III Director August 18, 1999
Pearson C. Cummin III
/s/ Peter L. Harris Director August 18, 1999
Peter L. Harris
/s/ Julius Jensen III Director August 18, 1999
Julius Jensen III
/s/ Sally Frame Kasaks Director August 18, 1999
Sally Frame Kasaks
/s/ Richard Lyons Director August 18, 1999
Richard Lyons
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
4. Pacific Sunwear of California, Inc. 1999 Stock Award
Plan.
5. Opinion of O'Melveny & Myers LLP (opinion re
legality).
23.1 Consent of Deloitte & Touche LLP (consent of
independent auditors).
23.2 Consent of O'Melveny & Myers LLP (included in Exhibit 5).
24. Power of Attorney (included in this Registration
Statement under "Signatures").
<PAGE>
PACIFIC SUNWEAR OF CALIFORNIA, INC.
1999 STOCK AWARD PLAN
(Composite Plan Document Reflecting June 8, 1999 Stock
Split)
<PAGE>
TABLE OF CONTENTS
Page
I. THE PLAN 1
1.1 Purpose 1
1.2 Administration 1
1.3 Participation 2
1.4 Stock Subject to the Plan 3
1.5 Grant of Awards 3
1.6 Exercise of Awards 3
1.7 No Transferability; Limited Exception to
Transfer Restrictions 4
II. OPTIONS 5
2.1 Grants 5
2.2 Option Price 5
2.3 Option Period 5
2.4 Exercise of Options 5
2.5 Limitations on Grant of Incentive Stock
Options 6
2.6 Non-Employee Director Awards 6
2.7 Options and Rights in Substitution for Stock
Options Granted by Other Corporations 8
2.8 Adjustments, No Repricing Without Prior
Shareholder Approval 8
III. STOCK APPRECIATION RIGHTS 8
3.1 Grants 8
3.2 Exercise of Stock Appreciation Rights 9
3.3 Payment 9
IV. RESTRICTED STOCK AWARDS 10
4.1 Grants 10
4.2 Restrictions 10
4.3 Return to the Corporation 10
V. PERFORMANCE SHARE AWARDS 11
5.1 Grants 11
5.2 Special Performance-Based Share Awards 11
VI. OTHER PROVISIONS 12
6.1 Rights of Eligible Employees, Participants
and Beneficiaries 12
6.2 Adjustments Upon Changes in Capitalization 13
6.3 Termination of Employment 14
6.4 Acceleration of Awards 15
6.5 Government Regulations 15
6.6 Tax Withholding 16
6.7 Amendment, Termination and Suspension 16
6.8 Privileges of Stock Ownership;
Nondistributive Intent 17
6.9 Effective Date of the Plan 17
6.10 Term of the Plan 17
6.11 Governing Law 18
6.12 Plan Construction 18
6.13 Captions 18
6.14 Non-Exclusivity of Plan 18
6.15 No Corporate Action Restriction 18
6.16 Other Company Benefit and Compensation
Program 19
VII. DEFINITIONS 19
7.1 Definitions 19
<PAGE>
PACIFIC SUNWEAR OF CALIFORNIA, INC.
1999 STOCK AWARD PLAN
(Composite Plan Document Reflecting June 8, 1999 Stock
Split)
I. THE PLAN.
1.1 Purpose.
The purpose of this Plan is to promote the success of
the Company by providing an additional means to attract,
motivate, retain and reward key personnel through the grant
of Options and other Awards that provide added long term
incentives for high levels of performance and for
significant efforts to improve the financial performance of
the Company. The purpose of this Plan is also to attract,
motivate and retain experienced and knowledgeable
independent directors through the Option grants provided
under Section 2.6.
1.2 Administration.
(a) This Plan shall be administered and all Awards (other
than those under Section 2.6) shall be authorized by the
Committee. Action of the Committee with respect to the
administration of this Plan shall be taken pursuant to a
majority vote or the unanimous written consent of its
members. In the event action by the Committee is taken by
written consent, the action shall be deemed to have been
taken at the time specified in the consent or, if none is
specified, at the time of the last signature. The Committee
may delegate administrative functions to individuals who are
officers or employees of the Company.
(b) Subject to the express provisions of this Plan, the
Committee shall have the authority:
(i) to grant Awards to Eligible Employees, determine the
price at which securities will be offered or awarded and the
amount of securities to be offered or awarded to any of such
persons, and determine the other specific terms and
conditions of such Awards consistent with the express limits
of this Plan, and establish the installments (if any) in
which such Awards shall become exercisable or shall vest, or
determine that no delayed exercisability or vesting is
required, and establish the events of termination or
reversion of such Awards;
(ii) to approve the forms of Award Agreements (which need
not be identical either as to type of award or among
Participants);
(iii) to construe and interpret this Plan and any
agreements defining the rights and obligations of the
Company and Participants under this Plan, further define the
terms used in this Plan, and prescribe, amend and rescind
rules and regulations relating to the administration of this
Plan;
(iv) to cancel, modify, or waive the Corporation's rights
with respect to, or modify, discontinue, suspend, or
terminate any or all outstanding Awards held by Eligible
Employees, subject to any required consent under Section
6.7;
(v) to accelerate or extend the exercisability or extend
the term of any or all such outstanding Awards within the
maximum ten-year term of Awards; and
(vi) to make all other determinations and take such
other action as contemplated by this Plan or as may be
necessary or advisable for the administration of this Plan
and the effectuation of its purposes.
Notwithstanding the foregoing, the provisions of Section 2.6
relating to Non-Employee Director Options shall be automatic
and, to the maximum extent possible, self-effectuating.
(c) Any action taken by, or inaction of, the Corporation,
any Subsidiary, the Board or the Committee relating or
pursuant to this Plan and within its authority hereunder or
under applicable law shall be within the absolute discretion
of that entity or body and shall be conclusive and binding
upon all persons. Neither the Board nor any Committee, nor
any member thereof or person acting at the direction
thereof, shall be liable for any act, omission,
interpretation, construction or determination made in good
faith in connection with this Plan (or any Award made under
this Plan), and all such persons shall be entitled to
indemnification and reimbursement by the Company in respect
of any claim, loss, damage or expense (including, without
limitation, attorneys' fees) arising or resulting therefrom
to the fullest extent permitted by law and/or under any
directors and officers liability insurance coverage that may
be in effect from time to time.
(d) Subject to the requirements of Section 7.1, the Board,
at any time it so desires, may increase or decrease the
number of members of the Committee, may remove from
membership on the Committee all or any portion of its
members, and may appoint such person or persons as it
desires to fill any vacancy existing on the Committee,
whether caused by removal, resignation or otherwise.
(e) In making any determination or in taking or not taking
any action under this Plan, the Committee or the Board, as
the case may be, may obtain and may rely upon the advice of
experts, including professional advisors to the Company. No
director, officer or agent of the Company shall be liable
for any such action or determination taken or made or
omitted in good faith.
1.3 Participation.
Awards may be granted only to Eligible Employees. An
Eligible Employee who has been granted an Award may, if
otherwise eligible, be granted additional Awards if the
Committee shall so determine. Except as provided in
Section 2.6 below, members of the Board who are not officers
or employees of the Company shall not be eligible to receive
Awards.
1.4 Stock Subject to the Plan.
(a) Subject to Section 6.2, the stock to be offered under
this Plan shall be shares of the Company's authorized but
unissued Common Stock. The aggregate amount of Common Stock
that may be issued or transferred pursuant to Awards
(including Incentive Stock Options) granted under this Plan
shall not exceed 1,200,000 shares, subject to adjustment as
set forth in Section 6.2. In no event shall more than
300,000 shares of Common Stock (subject to adjustment under
Section 6.2) be available for Awards issued (or reissued)
under this Plan as time-based Restricted Stock for nominal
or no consideration other than the par value thereof. This
limit on Restricted Stock does not apply to shares issued
principally for past services, in respect of compensation
earned but deferred, or as Performance-Based Awards under
Section 5.2. The aggregate number of shares of Common Stock
subject to Awards that may be granted to any employee in any
twelve month period may not exceed 300,000, subject to
adjustment as set forth in Section 6.2.
(b) No Award may be granted under this Plan unless, on the
date of grant, the sum of (i) the maximum number of shares
issuable at any time pursuant to such Award, plus (ii) the
number of shares that have previously been issued pursuant
to Awards granted under this Plan, other than reacquired
shares available for reissue consistent with any applicable
legal limitations, plus (iii) the maximum number of shares
that may be issued at any time after such date of grant
pursuant to Awards that are outstanding on such date, does
not exceed the share limit set forth in Section 1.4(a).
Shares that are subject to or underlie Awards which expire
or for any reason are cancelled or terminated, are
forfeited, fail to vest, or for any other reason are not
paid or delivered under this Plan, as well as reacquired
shares, shall again, except to the extent prohibited by law,
be available for subsequent Awards under the Plan.
1.5 Grant of Awards.
Subject to the express provisions of this Plan, the
Committee shall determine from the class of Eligible
Employees those individuals to whom Awards under this Plan
shall be granted, the number of shares of Common Stock
subject to each Award, the price (if any) to be paid for the
shares or the Award and, in the case of performance share
awards, in addition to matters addressed in Section 1.2(b),
the specific objectives, goals and performance criteria
(such as an increase in sales, market value, earnings or
book value over a base period, the years of service before
vesting, the relevant job classification or level of
responsibility or other factors) that further define the
terms of the performance share award. Each Award shall be
evidenced by an Award Agreement signed by the Corporation
and, if required by the Committee, by the Participant. The
Award Agreement shall set forth the material terms and
conditions of the Award established by the Committee
consistent with the specific provisions of this Plan. The
grant of an Award is made on the Award Date.
1.6 Exercise of Awards.
An Option or Stock Appreciation Right shall be deemed
to be exercised when the Secretary of the Company receives
written notice of such exercise from the Participant,
together with payment of the purchase price made in
accordance with Section 2.2(a), except to the extent payment
may be permitted to be made following delivery of written
notice of exercise in accordance with Section 2.2(b).
Notwithstanding any other provision of this Plan, the
Committee may impose, by rule and in Award Agreements, such
conditions upon the exercise of Awards (including, without
limitation, conditions limiting the time of exercise to
specified periods) as may be required to satisfy applicable
regulatory requirements.
1.7 No Transferability; Limited Exception to Transfer
Restrictions.
(a) Limit On Exercise and Transfer. Unless otherwise
expressly provided in (or pursuant to) this Section 1.7, by
applicable law and by the Award Agreement, as the same may
be amended, (i) all Awards are non-transferable and shall
not be subject in any manner to sale, transfer,
anticipation, alienation, assignment, pledge, encumbrance or
charge; Awards shall be exercised only by the Participant;
and (ii) amounts payable or shares issuable pursuant to an
Award shall be delivered only to (or for the account of) the
Participant.
(b) Exceptions. The Committee may permit Awards to be
exercised by and paid to certain persons or entities related
to the Participant, including but not limited to members of
the Participant's immediate family, charitable institutions,
or trusts or other entities whose beneficiaries or
beneficial owners are members of the Participant's immediate
family and/or charitable institutions, pursuant to such
conditions and procedures as the Committee may establish.
Any permitted transfer shall be subject to the condition
that the Committee receive evidence satisfactory to it that
the transfer is being made for estate and/or tax planning
purposes on a gratuitous or donative basis and without
consideration (other than nominal consideration).
Notwithstanding the foregoing or Section 1.7(c), Incentive
Stock Options and Restricted Stock Awards shall be subject
to any and all additional transfer restrictions under the
Code.
(c) Further Exceptions to Limits On Transfer. The exercise
and transfer restrictions in Section 1.7(a) shall not apply
to:
(i) transfers to the Company,
(ii) the designation of a beneficiary to receive
benefits in the event of the Participant's death or, if the
Participant has died, transfers to or exercise by the
Participant's beneficiary, or, in the absence of a validly
Designated beneficiary, transfers by will or the laws of
descent and distribution,
(iii) transfers pursuant to a QDRO order if approved or
ratified by the Committee,
(iv) if the Participant has suffered a disability,
permitted transfers or exercises on behalf of the Participant
by his or her legal representative, or
(v) the authorization by the Committee of "cashless
exercise" procedures with third parties who provide
financing for the purpose of (or who otherwise facilitate)
the exercise of Awards consistent with applicable laws and
the express authorization of the Committee.
II. OPTIONS.
2.1 Grants.
One or more Options may be granted to any Eligible
Employee. Each Option so granted shall be designated by the
Committee in the applicable Award Agreement as either a
Nonqualified Stock Option or an Incentive Stock Option.
2.2 Option Price.
(a) The purchase price per share of Common Stock covered by
each Option shall be determined by the Committee, but shall
not be less than 100% (110% in the case of an Incentive
Stock Option grant to a Participant who owns more than 10%
of the total combined voting power of all classes of stock
of the Company) of the Fair Market Value of the Common Stock
on the date the Option is granted. The purchase price of
any shares purchased shall be paid in full at the time of
each purchase in one or a combination of the following
methods: (i) in cash or by check payable to the order of the
Company, (ii) if authorized by the Committee or specified in
the Option being exercised, by a promissory note made by the
Participant in favor of the Company, upon the terms and
conditions determined by the Committee, and secured by the
Common Stock issuable upon exercise in compliance with
applicable law (including, without limitation, state
corporate law and federal margin requirements), or (iii) if
authorized by the Committee or specified in the Option being
exercised, by shares of Common Stock of the Company already
owned by the Participant; provided, however, that the
Committee may in its absolute discretion limit the
Participant's ability to exercise an Award by means other
than cash or check, and provided further that any shares
delivered which were initially acquired upon exercise of a
stock option must have been owned by the Participant at
least six months as of the date of delivery. Shares of
Common Stock used to satisfy the exercise price of an Option
shall be valued at their Fair Market Value on the date of
exercise.
(b) In addition to the payment methods described in
subsection (a), the Option may provide that the Option can
be exercised and payment made by delivering a properly
executed exercise notice together with irrevocable
instructions to a bank or broker to promptly deliver to the
Company the amount of sale or loan proceeds necessary to pay
the exercise price and, unless otherwise allowed by the
Committee, any applicable tax withholding under Section 6.6.
The Company shall not be obligated to deliver certificates
for the shares unless and until it receives full payment of
the exercise price therefor.
2.3 Option Period.
Each Option and all rights or obligations thereunder
shall expire on such date as shall be determined by the
Committee, but not later than 10 years after the Award Date,
and shall be subject to earlier termination as hereinafter
provided.
2.4 Exercise of Options.
Except as otherwise provided in Section 6.3 and 6.4, an
Option may become exercisable, in whole or in part, on the
date or dates specified in the Award Agreement and
thereafter shall remain exercisable until the expiration or
earlier termination of the Option. No Option shall be
exercisable for at least six months after the Award Date,
except in the case of death or Total Disability. The
Committee may, at any time after grant of the Option and
from time to time, increase the number of shares exercisable
at any time so long as the total number of shares subject to
the Option is not increased. No Option shall be exercisable
except in respect of whole shares, and fractional share
interests shall be disregarded. Not less than 10 shares of
Common Stock may be purchased at one time unless the number
purchased is the total number at the time available for
purchase under the terms of the Option.
2.5 Limitations on Grant of Incentive Stock Options.
(a) To the extent that the aggregate fair market value of
stock with respect to which incentive stock options first
become exercisable by a Participant in any calendar year
exceeds $100,000, taking into account both Common Stock
subject to Incentive Stock Options under this Plan and stock
subject to incentive stock options under all other plans of
the Company, such options shall be treated as nonqualified
stock options. For purposes of determining whether the
$100,000 limit is exceeded, the fair market value of stock
subject to options shall be determined as of the date the
options are awarded. In reducing the number of options
treated as incentive stock options to meet the $100,000
limit, the most recently granted options shall be reduced
first. To the extent a reduction of simultaneously granted
options is necessary to meet the $100,000 limit, the Company
may, in the manner and to the extent permitted by law,
designate which shares of Common Stock are to be treated as
shares acquired pursuant to the exercise of an Incentive
Stock Option.
(b) There shall be imposed in any Award Agreement relating
to Incentive Stock Options such terms and conditions as are
required in order that the Option be an "incentive stock
option" as that term is defined in Section 422 of the Code.
(c) No Incentive Stock Option may be granted to any person
who, at the time the Incentive Stock Option is granted, owns
shares of outstanding Common Stock possessing more than 10%
of the total combined voting power of all classes of stock
of the Company, unless the exercise price of such Option is
at least 110% of the Fair Market Value of the stock subject
to the Option and such Option by its terms is not
exercisable after the expiration of five years from the date
such Option is granted.
2.6 Non-Employee Director Awards.
(a) Participation. Awards under this Section 2.6 shall be
made only to Non-Employee Directors.
(b) Option Grants. Effective on the day after the
Company's 1999 annual meeting, as and when any person who is
not then an officer or employee of the Company shall become
a director of the Company, there shall be granted
automatically (without any action by the Board or the
Committee) a Nonqualified Stock Option (the grant or award
date of which shall be the date such person takes office) to
such person to purchase 9,000 shares of Common Stock.
(c) Subsequent Annual Options. In each calendar year
during the term of the Plan, commencing with the 2000 annual
meeting, there shall be granted automatically (without any
action by the Committee or the Board) a Nonqualified Stock
Option to purchase 9,000 shares of Common Stock to each Non-
Employee Director who is re-elected as a director of the
Company or who continues as a director (the grant or award
date of which shall be the date of the annual meeting of
shareholders in each such year).
(d) Option Price. The purchase price per share of the
Common Stock covered by each Option granted pursuant to this
Section 2.6 shall be one hundred percent of the Fair Market
Value of the Common Stock on the Award Date. The purchase
price of any shares purchased shall be paid in full at the
time of each purchase in cash or by check or in shares of
Common Stock valued at their Fair Market Value on the
business day next preceding the date of exercise of the
Option, or partly in such shares and partly in cash.
(e) Option Period. Each Option granted under this
Section 2.6 and all rights or obligations thereunder shall
expire on the fifth anniversary of the Award Date and shall
be subject to earlier termination as provided below.
(f) Exercise of Options. Except as otherwise provided
in Sections 2.6(g) and 2.6(h), each Option granted under this
Section 2.6 shall become exercisable (i) as to one-quarter
of the covered shares on the earlier of (A) the first
anniversary of the Award Date, or (B) the day immediately
preceding the first regularly scheduled Annual Meeting of
shareholders first occurring after the Award Date; and (ii)
as to an additional 1/48th of the covered shares in each of
the 36 months thereafter (using the Award Date as the date
of monthly vesting).
(g) Termination of Directorship. If a Non-Employee
Director Participant's services as a member of the Board
terminate, each Option granted pursuant to Section 2.6(b) or
(c) hereof held by such Non-Employee Director Participant
which is not then exercisable shall terminate; provided,
however, that if a Non-Employee Director Participant's
services as a member of the Board terminate by reason of
death or Total Disability, the Committee may, in its
discretion, consider to be exercisable a greater portion of
any such Option than would otherwise be exercisable, upon
such terms as the Committee shall determine. If a Non-
Employee Director Participant's services as a member of the
Board terminate by reason of death or Total Disability, any
portion of any such Option which is then exercisable may be
exercised for one year after the date of such termination or
the balance of such Option's term, whichever period is
shorter. If a Non-Employee Director Participant's services
as a member of the Board terminate for any other reason, any
portion of any such Option which is then exercisable may be
exercised for three months after the date of such
termination or the balance of such Option's term, whichever
period is shorter.
(h) Acceleration Upon an Event. Immediately prior to the
occurrence of an Event, in order to protect the holders of
Options granted under this Section 2.6, each Option granted
under Section 2.6(b) or (c) hereof shall become exercisable
in full.
(i) Adjustments. The specific numbers of shares stated
in the foregoing provisions of Section 2.6(b) and (c) hereof
and the consideration payable for such shares shall be
subject to adjustment in certain events as provided in
Section 6.2 of this Plan; provided, however, that the
specific number of shares stated in Section 2.6(b) and in
Section 2.6(c) shall not be adjusted, unless such adjustment
is approved by the Board, in connection with a split or
reverse split of the Common Stock.
2.7 Options and Rights in Substitution for Stock Options
Granted by Other Corporations.
Options and Stock Appreciation Rights may be granted to
Eligible Employees under this Plan in substitution for
employee stock options granted by other entities to persons
who are or who will become Eligible Employees in respect of
the Company, in connection with a distribution, merger or
reorganization by or with the granting entity or an
affiliated entity, or the acquisition by the Company,
directly or indirectly, of all or a substantial part of the
stock or assets of the other entity.
2.8 Adjustments, No Repricing Without Prior Shareholder
Approval.
Subject to Section 1.4 and Section 6.7 and the specific
limitations on Awards contained in this Plan, the Committee
from time to time may authorize, generally or in specific
cases only, for the benefit of any Eligible Employee any
adjustment in the exercise or repurchase price (except as
set forth below), vesting schedule, the number of shares
subject to, the restrictions upon or the term of, an Award
granted under this Article by cancellation of an outstanding
Award and a subsequent regranting of an Award, by amendment,
by substitution of an outstanding Award, by waiver or by
other legally valid means. Such amendment or other action
may result among other changes in an exercise or purchase
price which is higher or lower than the exercise or purchase
price of the original or prior Award (except as set forth
below), provide for a greater or lesser number of shares
subject to the Award, or provide for a longer or shorter
vesting or exercise period. Notwithstanding the foregoing,
in no case shall the per share exercise price of any Option
or related Stock Appreciation Right be reduced (by
amendment, substitution, cancellation and regrant or other
means) without stockholder approval to a price less than the
Fair Market Value of a share of Common Stock on the related
Award Date.
III. STOCK APPRECIATION RIGHTS.
3.1 Grants.
In its discretion, the Committee may grant Stock
Appreciation Rights concurrently with the grant of Options.
A Stock Appreciation Right shall extend to all or a portion
of the shares covered by the related Option. A Stock
Appreciation Right shall entitle the Participant who holds
the related Option, upon exercise of the Stock Appreciation
Right and surrender of the related Option, or portion
thereof, to the extent the Stock Appreciation Right and
related Option each were previously unexercised, to receive
payment of an amount determined pursuant to Section 3.3.
Any Stock Appreciation Right granted in connection with an
Incentive Stock Option shall contain such terms as may be
required to comply with the provisions of Section 422 of the
Code and the regulations promulgated thereunder. In its
discretion, the Committee may also grant Stock Appreciation
Rights independently of any Option subject to such
conditions as the Committee may in its absolute discretion
provide.
3.2 Exercise of Stock Appreciation Rights.
(a) A Stock Appreciation Right granted concurrently with
an Option shall be exercisable only at such time or times, and
to the extent, that the related Option shall be exercisable
and only when the Fair Market Value of the stock subject to
the related Option exceeds the exercise price of the related
Option.
(b) In the event that a Stock Appreciation Right granted
concurrently with an Option is exercised, the number of
shares of Common Stock subject to the related Option shall
be charged against the maximum amount of Common Stock that
may be issued or transferred pursuant to Awards under this
Plan. The number of shares subject to the Stock
Appreciation Right and the related Option of the Participant
shall also be reduced by such number of shares.
(c) If a Stock Appreciation Right granted concurrently
with an Option extends to less than all the shares covered by
the related Option and if a portion of the related Option is
thereafter exercised, the number of shares subject to the
unexercised Stock Appreciation Right shall be reduced only
if and to the extent that the remaining number of shares
covered by such related Option is less than the remaining
number of shares subject to such Stock Appreciation Right.
(d) A Stock Appreciation Right granted independently of
any Option shall be exercisable pursuant to the terms of the
Award Agreement but in no event earlier than six months
after the Award Date, except in the case of death or Total
Disability.
3.3 Payment.
(a) Upon exercise of a Stock Appreciation Right and
surrender of an exercisable portion of the related Option,
the Participant shall be entitled to receive payment of an
amount determined by multiplying
(i) the difference obtained by subtracting the exercise
price per share of Common Stock under the related Option
from the Fair Market Value of a share of Common Stock on the
date of exercise of the Stock Appreciation Right, by
(ii) the number of shares with respect to which the
Stock Appreciation Right shall have been exercised.
(b) The Committee, in its sole discretion, may settle the
amount determined under paragraph (a) above solely in cash,
solely in shares of Common Stock (valued at Fair Market
Value on the date of exercise of the Stock Appreciation
Right), or partly in such shares and partly in cash,
provided that the Committee shall have determined that such
exercise and payment are consistent with applicable law. In
any event, cash shall be paid in lieu of fractional shares.
Absent a determination to the contrary, all Stock
Appreciation Rights shall be settled in cash as soon as
practicable after exercise. The exercise price for the
Stock Appreciation Right shall be the exercise price of the
related Option. Notwithstanding the foregoing, the
Committee may, in the Award Agreement, determine the maximum
amount of cash or stock or a combination thereof which may
be delivered upon exercise of a Stock Appreciation Right.
(c) Upon exercise of a Stock Appreciation Right granted
independently of any Option, the Participant shall be
entitled to receive payment of an amount based on a
percentage, specified in the Award Agreement, of the
difference obtained by subtracting the Fair Market Value per
share of Common Stock on the Award Date from the Fair Market
Value per share of Common Stock on the date of exercise of
the Stock Appreciation Right. Such amount shall be paid as
described in paragraph (b) above.
IV. RESTRICTED STOCK AWARDS.
4.1 Grants.
Subject to Section 1.4, the Committee may, in its
discretion, grant one or more Restricted Stock Awards to any
Eligible Employee. Each Restricted Stock Award agreement
shall specify the number of shares of Common Stock to be
issued to the Participant, the date of such issuance, the
price, if any, to be paid for such shares by the Participant
and the restrictions imposed on such shares, which
restrictions shall not terminate earlier than six months
after the Award Date. Stock certificates evidencing shares
of Restricted Stock pending the lapse of the restrictions
shall bear a legend making appropriate reference to the
restrictions imposed hereunder and shall be held by the
Corporation or by a third party designated by the Committee
until the restrictions on such shares shall have lapsed and
the shares shall have vested in accordance with the
provisions of the Award. Upon issuance of the Restricted
Stock Award, the Participant may be required to provide such
further assurance and documents as the Committee may require
to enforce the restrictions.
4.2 Restrictions.
(a) Shares of Common Stock included in Restricted Stock
Awards may not be sold, assigned, transferred, pledged or
otherwise disposed of or encumbered, either voluntarily or
involuntarily, until such shares have vested.
(b) Unless otherwise provided in the applicable Award
Agreement, Participants receiving Restricted Stock shall be
entitled to dividend and voting rights for the shares issued
even though they are not vested, provided that such rights
shall terminate immediately as to any forfeited Restricted
Stock.
(c) In the event that the Participant shall have paid
cash in connection with the Restricted Stock Award, the Award
Agreement shall specify whether and to what extent such cash
shall be returned upon a forfeiture (with or without an
earnings factor).
4.3 Return to the Corporation.
Unless the Committee otherwise expressly provides,
shares of Restricted Stock that remain subject to
restrictions at the time of termination of employment or are
subject to other conditions to vesting that have not been
satisfied by the time specified in the applicable Award
Agreement shall not vest and shall be returned to the
Corporation in such manner and on such terms as the
Committee shall therein provide.
V. PERFORMANCE SHARE AWARDS.
5.1 Grants.
The Committee may, in its discretion, grant Performance
Share Awards to Eligible Employees based upon such factors
as the Committee shall determine. A Performance Share Award
agreement shall specify the number of shares of Common Stock
subject to the Performance Share Award, the price, if any,
to be paid for such shares by the Participant and the
conditions upon which issuance to the Participant shall be
based, which issuance shall not be earlier than six months
after the Award Date.
5.2 Special Performance-Based Share Awards.
Without limiting the generality of the foregoing, and
in addition to options granted under other provisions of
this Plan, other performance-based awards within the meaning
of Section 162(m) of the Code ("Performance-Based Awards"),
whether in the form of restricted stock, performance stock,
phantom stock, or other rights, the vesting or payment of
which depends on the degree of achievement of the
Performance Goals relative to pre-established targeted
levels for the Company and/or one or more of its
Subsidiaries or divisions, may be granted under this Plan.
An award that is intended to satisfy the requirements of
this Section 5.2 shall be designated as a Performance-Based
Award at the time of grant.
(a) Eligible Class. The eligible class of persons for
Performance-Based Awards under this Section shall be the
executive officers of the Company.
(b) Performance Goal Alternatives. The specific
performance goals for Performance-Based Awards granted under
this Section shall be, on an absolute or relative basis, one
or more of the Performance Goals, as selected by the
Committee in its sole discretion. The Committee shall
establish in the applicable Award Agreement the specific
performance target(s) relative to the Performance Goal(s)
which must be attained before the compensation under the
Performance-Based Award becomes payable. The specific
targets shall be determined within the time period permitted
under Section 162(m) of the Code (and any regulations issued
thereunder) so that such targets are considered to be pre-
established and so that the attainment of such targets is
substantially uncertain at the time of their establishment.
The applicable performance measurement period may not be
less than one nor more than 10 years.
(c) Maximum Performance-Based Award. Notwithstanding
any other provision of the Plan to the contrary, the maximum
number of shares which may be delivered pursuant to awards
that are granted as Performance-Based Awards under this
Section 5.2 to any Participant in any calendar year shall
not exceed 300,000 shares, either individually or in the
aggregate, subject to adjustment as provided in Section 6.2.
Awards that are cancelled during the year shall be counted
against this limit to the extent required by Section 162(m)
of the Code.
(d) Committee Certification. Before any Performance-
Based Award under this Section 5.2 is paid, the Committee must
certify in writing that the Performance Goal(s) and any
other material terms of the Performance-Based Award were
satisfied; provided, however, that a Performance-Based Award
may be paid without regard to the satisfaction of the
applicable Performance Goal in the event of a change in
control event in accordance with Section 162(m) of the Code
and Section 6.2.
(e) Terms and Conditions of Awards. The Committee will
have the discretion to determine the restrictions or other
limitations of the individual awards granted under this
Section 5.2 including the authority to reduce awards,
payouts or vesting or to pay no awards, in its sole
discretion, if the Committee preserves such authority at the
time of grant by language to this effect in its authorizing
resolutions or otherwise.
(f) Adjustments for Changes in Capitalization and other
Material Changes. In the event of a change in corporate
capitalization, such as a stock split or stock dividend, or
a corporate transaction, such as a merger, consolidation,
spinoff, reorganization or similar event, or any partial or
complete liquidation of the Company, or any similar event
consistent with regulations issued under Section 162(m) of
the Code including, without limitation, any material change
in accounting policies or practices affecting the Company
and/or the Performance Goals or targets, then the Committee
may make adjustments to the Performance Goals and targets
relating to outstanding Performance-Based Awards to the
extent such adjustments are made to reflect the occurrence
of such an event; provided, however, that adjustments
described in this subsection may be made only to the extent
that the occurrence of an event described herein was
unforeseen at the time the targets for a Performance-Based
Award were established by the Committee.
VI. OTHER PROVISIONS.
6.1 Rights of Eligible Employees, Participants and
Beneficiaries.
(a) Status as an Eligible Employee shall not be construed
as a commitment that any Award will be made under this Plan
to any Eligible Employee generally.
(b) Nothing contained in this Plan (or in Award Agreements
or in any other documents related to this Plan or to Awards)
shall confer upon any Eligible Employee or Participant any
right to continue in the service or employ of the Company or
constitute any contract or agreement of service or
employment, or interfere in any way with the right of the
Company to reduce such person's compensation or other
benefits or to terminate the services or employment of such
Eligible Employee or Participant, with or without cause, but
nothing contained in this Plan or any document related
thereto shall affect any other contractual right of any
Eligible Employee or Participant.
(c) No Participant, Beneficiary or other person shall have
any right, title or interest in any fund or in any specific
asset (including shares of Common Stock) of the Company by
reason of any Award granted hereunder. Neither the
provisions of this Plan (or of any documents related
hereto), nor the creation or adoption of this Plan, nor any
action taken pursuant to the provisions of this Plan shall
create, or be construed to create, a trust of any kind or a
fiduciary relationship between the Company and any
Participant, Beneficiary or other person. To the extent
that a Participant, Beneficiary or other person acquires a
right to receive an Award hereunder, such right shall be no
greater than the right of any unsecured general creditor of
the Company.
6.2 Adjustments Upon Changes in Capitalization.
(a) If the outstanding shares of Common Stock are changed
into or exchanged for cash or a different number or kind of
shares or securities of the Company or of another issuer, or
if additional shares or new or different securities are
distributed with respect to the outstanding shares of the
Common Stock, through a reorganization or merger to which
the Company is a party, or through a combination,
consolidation, recapitalization, reclassification, stock
split, stock dividend, reverse stock split, stock
consolidation or other capital change or adjustment, an
appropriate adjustment shall be made in the number and kind
of shares or other consideration that is subject to or may
be delivered under this Plan and pursuant to outstanding
Awards. A corresponding adjustment to the consideration
payable with respect to Awards granted prior to any such
change and to the price, if any, paid in connection with
Restricted Stock Awards or Performance Share Awards or
Performance-Based Awards shall also be made. Any such
adjustment, however, shall be made without change in the
total payment, if any, applicable to the portion of the
Award not exercised but with a corresponding adjustment in
the price for each share. Corresponding adjustments shall be
made with respect to Stock Appreciation Rights based upon
the adjustments made to the Options to which they are
related or, in the case of Stock Appreciation Rights granted
independently of any Option, based upon the adjustments made
to Common Stock.
(b) Upon the dissolution or liquidation of the Company,
or upon a reorganization, merger or consolidation of the
Company with one or more corporations as a result of which
the Company is not the surviving corporation, the Plan and
outstanding Awards shall terminate. Notwithstanding the
foregoing, the Committee may provide in writing in
connection with, or in contemplation of, any such
transaction for any or all of the following alternatives
(separately or in combinations): (i) for the assumption by
the successor corporation of the Awards theretofore granted
or the substitution by such corporation for such Awards of
awards covering the stock of the successor corporation, or a
parent or subsidiary thereof, with appropriate adjustments
as to the number and kind of shares and prices; (ii) for the
continuance of this Plan by such successor corporation in
which event this Plan and the Awards shall continue in the
manner and under the terms so provided; or (iii) for the
payment in cash or shares of Common Stock in lieu of and in
complete satisfaction of such Awards.
(c) In adjusting Awards to reflect the changes described
in this Section 6.2, or in determining that no such adjustment
is necessary, the Committee may rely upon the advice of
independent counsel and accountants of the Company, and the
determination of the Committee shall be conclusive. No
fractional shares of stock shall be issued under this Plan
on account of any such adjustment.
(d) In any of such events, the Committee may take such
action prior to such event to the extent that the Committee
deems the action necessary to permit the Participant to
realize the benefits intended to be conveyed with respect to
the underlying shares in the same manner as is or will be
available to shareholders generally.
6.3 Termination of Employment.
(a) If the Participant's service to or employment by the
Company terminates for any reason other than Retirement,
death or Total Disability, the Participant shall have,
subject to earlier termination pursuant to or as
contemplated by Section 2.3, three months or such shorter
period as is provided in the Award Agreements from the date
of termination of services or employment to exercise any
Option to the extent it shall have become exercisable on the
date of termination of employment, and any Option not
exercisable on that date shall terminate. Notwithstanding
the preceding sentence, in the event the Participant is
discharged for cause as determined by the Committee in its
sole discretion, all Options shall lapse immediately upon
such termination of services or employment.
(b) If the Participant's service to or employment by
the Company terminates as a result of Retirement or Total
Disability, the Participant or Participant's Personal
Representative, as the case may be, shall have, subject to
earlier termination pursuant to or as contemplated by
Section 2.3, 12 months (or, in the case of Incentive Stock
Options where the Participant terminates as a result of
Retirement, three months) or such shorter period as is
provided in the Award Agreements from the date of
termination of services or employment to exercise any Option
to the extent it shall have become exercisable by the date
of termination of services or employment and any Option not
exercisable on that date shall terminate.
(c) If the Participant's service to or employment by
the Company terminates as a result of death while the
Participant is rendering services to the Company or is
employed by the Company or during the 12 month period (or,
in the case of Incentive Stock Options where the Participant
has terminated as a result of Retirement, three month
period) referred to in subsection (b) above, the
Participant's Option shall be exercisable by the
Participant's Beneficiary, subject to earlier termination
pursuant to or as contemplated by Section 2.3, during the 12
month period or such shorter period as is provided in the
Award Agreements following the Participant's death, as to
all or any part of the shares of Common Stock covered
thereby to the extent exercisable on the date of death (or
earlier termination).
(d) Each Stock Appreciation Right granted concurrently
with an Option shall have the same termination provisions and
exercisability periods as the Option to which it relates.
The termination provisions and exercisability periods of any
Stock Appreciation Right granted independently of an Option
shall be established in accordance with Section 3.2(d). The
exercisability period of a Stock Appreciation Right shall
not exceed that provided in Section 2.3 or in the related
Award Agreement and the Stock Appreciation Right shall
expire at the end of such exercisability period.
(e) In the event of termination of services to or
employment with the Company for any reason, (i) shares of
Common Stock subject to the Participant's Restricted Stock
Award shall be forfeited in accordance with the provisions
of the related Award Agreement to the extent such shares
have not become vested on that date; and (ii) shares of
Common Stock subject to the Participant's Performance Share
Award or Performance-Based Award shall be forfeited in
accordance with the provisions of the related Award
Agreement to the extent such shares have not been issued or
become issuable on that date.
(f) In the event of termination of services to or
employment with the Company for any reason, other than
discharge for cause, the Committee may, in its discretion,
increase the portion of the Participant's Award available to
the Participant, or Participant's Beneficiary or Personal
Representative, as the case may be, upon such terms as the
Committee shall determine.
(g) If an entity ceases to be a Subsidiary, such action
shall be deemed for purposes of this Section 6.3 to be a
termination of services or employment of each consultant or
employee of that entity who does not continue as a
consultant or as an employee of another entity within the
Company.
(h) Upon forfeiture of a Restricted Stock Award pursuant
to this Section 6.3, the Participant, or his or her Beneficiary
or Personal Representative, as the case may be, shall
transfer to the Company the portion of the Restricted Stock
Award not vested at the date of termination of services or
employment, without payment of any consideration by the
Company for such transfer unless the Participant paid a
purchase price in which case repayment, if any, of that
price shall be governed by the Award Agreement.
Notwithstanding any such transfer to the Company, or
failure, refusal or neglect to transfer, by the Participant,
or his or her Beneficiary or Personal Representative, as the
case may be, such nonvested portion of any Restricted Stock
Award shall be deemed transferred automatically to the
Company on the date of termination of services or
employment. The Participant's original acceptance of the
Restricted Stock Award shall constitute his or her
appointment of the Company and each of its authorized
representatives as attorney(s)-in-fact to effect such
transfer and to execute such documents as the Company or
such representatives deem necessary or advisable in
connection with such transfer.
6.4 Acceleration of Awards.
Unless prior to an Event the Board determines that,
upon its occurrence, there shall be no acceleration of
Awards or determines those Awards which shall be accelerated
and the extent to which they shall be accelerated, upon the
occurrence of an Event (i) each Option and each related
Stock Appreciation Right shall become immediately
exercisable to the full extent theretofore not exercisable,
(ii) Restricted Stock shall immediately vest free of
restrictions and (iii) the number of shares covered by each
Performance Share Award or Performance-Based Award shall be
issued to the Participant; subject, however, to compliance
with applicable regulatory requirements, including without
limitation and Section 422 of the Code. For purposes of
this section only, the Board shall mean the Board as
constituted immediately prior to the Event.
6.5 Government Regulations.
This Plan, the granting of Awards under this Plan and
the issuance or transfer of shares of Common Stock (and/or
the payment of money) pursuant thereto are subject to all
applicable federal and state laws, rules and regulations and
to such approvals by any regulatory or governmental agency
(including without limitation "no action" positions of the
Commission) which may, in the opinion of counsel for the
Company, be necessary or advisable in connection therewith.
Without limiting the generality of the foregoing, no Awards
may be granted under this Plan, and no shares shall be
issued by the Company, nor cash payments made by the
Company, pursuant to or in connection with any such Award,
unless and until, in each such case, all legal requirements
applicable to the issuance or payment have, in the opinion
of counsel to the Company, been complied with. In
connection with any stock issuance or transfer, the person
acquiring the shares shall, if requested by the Company,
give assurances satisfactory to counsel to the Company in
respect of such matters as the Company may deem desirable to
assure compliance with all applicable legal requirements.
6.6 Tax Withholding.
(a) Upon the disposition by a Participant or other person
of shares of Common Stock acquired pursuant to the exercise
of an Incentive Stock Option prior to satisfaction of the
holding period requirements of Section 422 of the Code, or
upon the exercise of a Nonqualified Stock Option, the
exercise of a Stock Appreciation Right, the vesting of a
Restricted Stock Award or the payment of a Performance Share
Award or Performance-Based Award, the Company shall have the
right to (i) require such Participant or such other person
to pay by cash or check payable to the Company, the amount
of any taxes which the Company may be required to withhold
with respect to such transactions or (ii) deduct from
amounts paid in cash the amount of any taxes which the
Company may be required to withhold with respect to such
cash amounts. The above notwithstanding, in any case where
a tax is required to be withheld in connection with the
issuance or transfer of shares of Common Stock under this
Plan, the Participant may elect, pursuant to such rules as
the Committee may establish, to have the Company reduce the
number of such shares issued or transferred by the
appropriate number of shares to accomplish such withholding;
provided, the Committee may impose such conditions on the
payment of any withholding obligation as may be required to
satisfy applicable regulatory requirements.
(b) The Committee may, in its discretion, permit a loan
from the Company to a Participant in the amount of any taxes
which the Company may be required to withhold with respect
to shares of Common Stock received pursuant to a transaction
described in subsection (a) above. Such a loan will be for
a term, at a rate of interest and pursuant to such other
terms and rules as the Committee may establish.
6.7 Amendment, Termination and Suspension.
(a) The Board may, at any time, terminate or, from
time to time, amend, modify or suspend this Plan (or any
part hereof). No Awards may be granted during any suspension
of this Plan or after termination of this Plan, but the
Committee shall retain jurisdiction as to Awards then
outstanding in accordance with the terms of this Plan.
(b) To the extent then required under Sections 162, 422
or 424 of the Code or any other applicable law, or deemed
necessary or advisable by the Board, any amendment to this
Plan shall be subject to shareholder approval.
(c) Without limiting any other express authority of the
Committee under (but subject to) the express limits of this
Plan, the Committee by agreement or resolution may waive
conditions of or limitations on Awards to Participants that
the Committee in the prior exercise of its discretion has
imposed, without the consent of a Participant, and may make
other changes to the terms and conditions of Awards that do
not affect in any manner materially adverse to the
Participant, the Participant's rights and benefits under an
Award.
(d) No amendment, suspension or termination of this Plan
or change of or affecting any outstanding Award shall, without
written consent of the Participant, affect in any manner
materially adverse to the Participant any rights or benefits
of the Participant or obligations of the Company under any
Award granted under this Plan prior to the effective date of
such change. Changes contemplated by Section 6.2 shall not
be deemed to constitute changes or amendments for purposes
of this Section 6.7.
6.8 Privileges of Stock Ownership; Nondistributive Intent.
A Participant shall not be entitled to the privilege of
stock ownership as to any shares of Common Stock not
actually issued to him or her. Upon the issuance and
transfer of shares to the Participant, unless a registration
statement is in effect under the Securities Act and
applicable state securities law, relating to such issued and
transferred Common Stock and there is available for delivery
a prospectus meeting the requirements of Section 10 of the
Securities Act, the Common Stock may be issued and
transferred to the Participant only if he or she represents
and warrants in writing to the Company that the shares are
being acquired for investment and not with a view to the
resale or distribution thereof. No shares shall be issued
and transferred unless and until there shall have been full
compliance with any then applicable regulatory requirements
(including those of exchanges upon which any Common Stock of
the Company may be listed).
6.9 Effective Date of the Plan.
This Plan shall be effective upon its approval by the
Board (the "Effective Date"), subject to approval by the
shareholders of the Company within twelve months from the
date of such Board approval.
6.10 Term of the Plan.
Unless previously terminated by the Board, this Plan
shall terminate at the close of business on the day before
the tenth anniversary of the Effective Date, and no Awards
shall be granted under it thereafter, but such termination
shall not affect any Award theretofore granted. Unless
otherwise expressly provided in this Plan or in an
applicable Award Agreement, any Award granted prior to the
Plan's termination date may extend beyond such date, and all
authority of the Committee with respect to Awards hereunder,
including the authority to amend an Award, shall continue
during any suspension of this Plan and in respect of Awards
outstanding on the termination date.
6.11 Governing Law.
This Plan and the documents evidencing Awards and all
other related documents shall be governed by, and construed
in accordance with, the laws of the State of California. If
any provision shall be held by a court of competent
jurisdiction to be invalid and unenforceable, the remaining
provisions of this Plan shall continue to be fully
effective.
6.12 Plan Construction.
(a) Rule 16b-3. It is the intent of the Company that
the Awards and transactions permitted by Awards generally
satisfy and be interpreted in a manner that, in the case of
Participants who are or may be subject to Section 16 of the
Exchange Act, satisfies the applicable requirements of Rule
16b-3 promulgated thereunder so that such persons (unless
they otherwise agree) will be entitled to the benefits of
Rule 16b-3 or other exemptive rules under Section 16 of the
Exchange Act in respect of those transactions and will not
be subjected to avoidable liability.
(b) Section 162(m). It is the further intent of the
Company that (to the extent the Company or Awards under
This Plan may be or become subject to limitations on
deductibility under Section 162(m) of the Code), Options or
SARs granted with an exercise or base price not less than
Fair Market Value on the date of grant and Performance-Based
Awards under Section 5.2 of this Plan that are granted to or
held by a person subject to Section 162(m) of the Code will
qualify as performance-based compensation or otherwise be
exempt from deductibility limitations under Section 162(m)
of the Code, to the extent that the Committee authorizing
the Award (or the payment thereof, as the case may be)
satisfies any applicable administrative requirements
thereof.
6.13 Captions.
Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to
facilitate reference. Such headings shall not be deemed in
any way material or relevant to the construction or
interpretation of this Plan or any provision thereof.
6.14 Non-Exclusivity of Plan.
Nothing in this Plan shall limit or be deemed to limit
the authority of the Board or the Committee to grant awards
or authorize any other compensation, with or without
reference to the Common Stock, under any other plan or
authority.
6.15 No Corporate Action Restriction.
The existence of the Plan, the Award Agreements and the
Awards granted hereunder shall not limit, affect or restrict
in any way the right or power of the Board or the
shareholders of the Corporation to make or authorize: (a)
any adjustment, recapitalization, reorganization or other
change in the Corporation's or any Subsidiary's capital
structure or its business, (b) any merger, amalgamation,
consolidation or change in the ownership of the Corporation
or any subsidiary, (c) any issue of bonds, debentures,
capital, preferred or prior preference stock ahead of or
affecting the Corporation's or any Subsidiary's capital
stock or the rights thereof, (d) any dissolution or
liquidation of the Corporation or any Subsidiary, (e) any
sale or transfer of all or any part of the Corporation or
any Subsidiary's assets or business, or (f) any other
corporate act or proceeding by the Corporation or any
Subsidiary. No participant, beneficiary or any other person
shall have any claim under any Award or Award Agreement
against any member of the Board or the Committee, or the
Corporation or any employees, officers or agents of the
Corporation or any Subsidiary, as a result of any such
action.
6.16 Other Company Benefit and Compensation Program.
Payments and other benefits received by a Participant
under an Award made pursuant to this Plan shall not be
deemed a part of a Participant's compensation for purposes
of the determination of benefits under any other employee
welfare or benefit plans or arrangements, if any, provided
by the Corporation or any Subsidiary, except where the
Committee or the Board expressly otherwise provides or
authorizes in writing. Awards under this Plan may be made
in addition to, in combination with, as alternatives to or
in payment of grants, awards or commitments under any other
plans or arrangements of the Company or the Subsidiaries.
VII. DEFINITIONS.
7.1 Definitions.
(a) "Award" means an Option, which may be designated as a
Nonqualified Stock Option or an Incentive Stock Option, a
Stock Appreciation Right, a Restricted Stock Award,
Performance Share Award or Performance-Based Award, in each
case granted under this Plan.
(b) "Award Agreement" means a written agreement setting
forth the terms of an Award.
(c) "Award Date" means the date upon which the Committee
took the action granting an Award or such later date as is
prescribed by the Committee or, in the case of Options
granted under Section 2.6, the date specified in such
Section 2.6.
(d) "Beneficiary" means the person, persons, trust or
trusts entitled by will or the laws of descent and
distribution to receive the benefits specified under this
Plan in the event of a Participant's death, and shall mean
the Participant's executor or administrator if no other
Beneficiary is designated and able to act under the
circumstances.
(e) "Board" means the Board of Directors of the Company.
(f) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(g) "Commission" means the Securities and Exchange
Commission.
(h) "Committee" means the Board or a committee appointed
by the Board to administer this Plan, which committee shall be
comprised only of two or more directors or such greater
number of directors as may be required under applicable law,
each of whom (i) in respect of any transaction at a time
when the affected Participant may be subject to Section
162(m) of the Code, shall be an "outside director" within
the meaning of Section 162(m) of the Code and (ii) in
respect of any transaction at a time when the affected
Participant may be subject to Section 16 of the Exchange
Act, shall be a "Non-Employee Director" within the meaning
of Rule 16b-3(b)(3) under the Exchange Act.
(i) "Common Stock" means the Common Stock of the Company.
(j) "Company" means Pacific Sunwear of California, Inc., a
California corporation, and its successors.
(k) "Eligible Employee" means an officer or key employee of
the Company and consultants to the Company whether or not
such consultants are employees.
(l) "Event" means any of the following:
(i) Approval by the shareholders of the Company of the
dissolution or liquidation of the Company;
(ii) Approval by the shareholders of the Company of an
agreement to merge or consolidate, or otherwise reorganize,
with or into one or more entities other than Subsidiaries,
as a result of which less than 50% of the outstanding voting
securities of the surviving or resulting entity are, or are
to be, owned by former shareholders of the Company; or
(iii) Approval by the shareholders of the Company of the
sale of substantially all of the Company's business assets
to a person or entity which is not a Subsidiary.
(m) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(n) "Fair Market Value" means (i) if the stock is listed
or admitted to trade on a national securities exchange, the
closing price of the stock on the Composite Tape, as
published in the Western Edition of The Wall Street Journal,
of the principal national securities exchange on which the
stock is so listed or admitted to trade, on such date, or,
if there is no trading of the stock on such date, then the
closing price of the stock as quoted on such Composite Tape
on the next preceding date on which there was trading in
such shares; (ii) if the stock is not listed or admitted to
trade on a national securities exchange, the last price for
the stock on such date, as furnished by the National
Association of Securities Dealers, Inc. ("NASD") through the
NASDAQ National Market Reporting System or a similar
organization if the NASD is no longer reporting such
information; (iii) if the stock is not listed or admitted to
trade on a national securities exchange and is not reported
on the National Market Reporting System, the mean between
the bid and asked price for the stock on such date, as
furnished by the NASD; or (iv) if the stock is not listed or
admitted to trade on a national securities exchange, is not
reported on the National Market Reporting System and if bid
and asked prices for the stock are not furnished by the NASD
or a similar organization, the values established by the
Committee for purposes of the Plan.
(o) "Incentive Stock Option" means an option which is
designated as an incentive stock option within the meaning
of Section 422 of the Code, the award of which contains such
provisions as are necessary to comply with that section.
(p) "Non-Employee Director" means a member of the Board
who is not an officer or employee of the Company.
(q) "Non-Employee Director Participant" means a Non-
Employee Director who has been granted an Option under
Section 2.6.
(r) "Nonqualified Stock Option" means an option which
is designated as a Nonqualified Stock Option and shall include
any Option intended as an Incentive Stock Option that fails
to meet the applicable legal requirements thereof.
(s) "Option" means an option to purchase Common Stock
under this Plan. An Option shall be designated by the Committee
as a Nonqualified Stock Option or an Incentive Stock Option.
(t) "Participant" means an Eligible Employee who has been
granted an Award and a Non-Employee Director who has
received an Option under Section 2.6.
(u) "Performance Goal" means any one or more of the
criteria set forth on Exhibit A hereto.
(v) "Performance-Based Awards" shall mean an Award of a
right to receive shares of Common Stock or other
compensation (including cash) under Section 5.2, the
issuance or payment of which is contingent upon, among other
conditions, the attainment of performance objectives
specified by the Committee.
(w) "Performance Share Award" means an award of shares of
Common Stock under Section 5.1, the issuance of which is
contingent upon attainment of performance objectives
specified by the Committee.
(x) "Personal Representative" means the person or persons
who, upon the disability or incompetence of a Participant,
shall have acquired on behalf of the Participant by legal
proceeding or otherwise the power to exercise the rights and
receive the benefits specified in this Plan.
(y) "Plan" means the Pacific Sunwear of California, Inc.
1999 Stock Award Plan, as it may be amended from time to
time.
(z) "QDRO" shall mean an order requiring the transfer
of an Award or portion thereof pursuant to a state domestic
relations law to the spouse, former spouse, child or other
dependent of a Participant. Such order must be in a form
substantially identical to a qualified domestic relations
order as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended.
(aa) "Restricted Stock" means those shares of Common
Stock issued pursuant to a Restricted Stock Award which are
subject to the restrictions set forth in the related Award
Agreement.
(bb) "Restricted Stock Award" means an award of a fixed
number of shares of Common Stock to the Participant subject,
however, to payment of such consideration, if any, and such
forfeiture provisions, as are set forth in the Award
Agreement.
(cc) "Retirement" means retirement from employment by or
providing services to the Company or any Subsidiary after
age 65 and, in the case of employees, in accordance with the
retirement policies of the Company then in effect.
(dd) "Securities Act" means the Securities Act of 1933,
as amended.
(ee) "Stock Appreciation Right" means a right to receive a
number of shares of Common Stock or an amount of cash, or a
combination of shares and cash, determined as provided in
Section 3.3(a).
(ff) "Subsidiary" means any corporation or other entity a
majority or more of whose outstanding voting stock or voting
power is beneficially owned directly or indirectly by the
Company.
(gg) "Total Disability" means a "permanent and total
disability" within the meaning of Section 22(e)(3) of the
Code and, in the case of Awards other than Incentive Stock
Options, such other disabilities, infirmities, afflictions
or conditions as the Committee by rule may include.
EXHIBIT A
PERFORMANCE GOALS
The Performance Targets shall mean any one or a
combination of the following.
EBIT. "EBIT" means Net Income before interest expense
and taxes.
EBITDA. "EBITDA" means Net Income before interest
expense, taxes, depreciation and amortization.
EPS. "EPS" means Net Income divided by the weighted
average number of common shares outstanding. Unless
otherwise provided by the Committee in the related Award
Agreement, common shares outstanding shall be adjusted to
include the dilutive effect of stock options, restricted
stock and other dilutive financial instruments.
Expense Reduction. "Expense Reduction" means reduction
in actual expense or an improvement in the expense to Net
Sales ratio compared to a target or prior year actual
expense to Sales ratio.
Debt to EBITDA. "Debt to EBITDA" means the ratio of
debt to EBITDA.
Interest Coverage. "Interest Coverage" means the ratio
of EBITDA to interest expense.
Inventory Turns. "Inventory Turns" means the ratio of
total cost of goods sold on a historical basis to average
net inventory.
Net Income. "Net Income" means the difference between
total Net Sales and total costs and expenses, including
income taxes.
Net Sales. "Net Sales" means net sales.
Operating Cash Flow. "Operating Cash Flow" means the
net cash provided by operating activities less net cash used
by operations and investing activities as shown on the
statement of cash flows.
Pre-Tax Margin. "Pre-Tax Margin" means the ratio of
earnings before income taxes to Net Sales.
Return on Assets. "Return on Assets" means the ratio of
Net Income to total average assets including goodwill.
Return on Capital. "Return on Capital" means the ratio
of Net Income to average total capital. Total capital
includes working capital, and other long term assets such as
PP&E, goodwill and intangibles, and leased assets. Unless
otherwise provided by the Committee in the related Award
Agreement, cash, deferred tax assets and debt shall not be
included in capital for calculation purposes.
Return on Equity. "Return on Equity" means Net Income
divided by average total equity.
Stock Price Appreciation. "Stock Price Appreciation"
means an increase, or an average annualized increase, in the
stock price or market value of the Common Stock of the
Company after the date of grant of an Award or above a
specified price.
Working Capital Improvement. "Working Capital
Improvement" means the net change in current assets less
current liabilities over the applicable period or the
reduction in the current ratio (current assets divided by
current liabilities), excluding changes in cash and cash
equivalents, and current and deferred income taxes.
September 3, 1999
Pacific Sunwear of California, Inc.
5200 East La Palma Avenue
Anaheim, California 92807
Re: Registration on Form S-8 of Pacific
Sunwear of California, Inc. (the
"Company")
Ladies and Gentlemen:
At your request, we have examined the Registration Statement
on Form S-8 to be filed with the Securities and Exchange
Commission in connection with the registration under the
Securities Act of 1933, as amended, of 1,200,000 shares of Common
Stock, $0.01 par value per share, of the Company (the "Common
Stock"), to be issued pursuant to the Pacific Sunwear of
California, Inc. 1999 Stock Award Plan (the "Plan"). We have
examined the proceedings heretofore taken and to be taken in
connection with the authorization of the Plan and the Common
Stock to be issued pursuant to and in accordance with the Plan.
Based upon such examination and upon such matters of fact
and law as we have deemed relevant, we are of the opinion that
the Common Stock has been duly authorized by all necessary
corporate action on the part of the Company and, when issued in
accordance with such authorization, the provisions of the Plan
and relevant agreements duly authorized by and in accordance with
the terms of the Plan, will be validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement.
Respectfully submitted,
/s/ O'Melveny & Myers LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Pacific Sunwear of California, Inc.
We consent to the incorporation by reference in this Registration
Statement of Pacific Sunwear of California, Inc. on Form S-8
pertaining to the Pacific Sunwear of California, Inc. 1999 Stock Award
Plan, of our report dated March 12, 1999, appearing in the Annual
Report on Form 10-K for Pacific Sunwear of California, Inc. for the
year ended January 31, 1999.
Deloitte & Touche LLP
Costa Mesa, California
September 2, 1999
